UNITED STATES TARIFF COMMISSION

CONCORD GRAPES FROM CANADA

Determination of No Injury or Likelihood Thereof in Investigation No. AA1921- 56

under the Antidumping Act, 1921, as Amended

TC Publication 292 Washington, D.C.

August 1969

UNITED STATES TARIFF COMMISSION

Glenn W. Sutton, chairman

Penelope H. Thunberg

Bruce E. Clubb

Will E. Leonard, Jr.

Herschel D. Newsom

Willard W. Kane, Acting Secretary

Address all communications to

United States Tariff Commission

Washington, D.C. 20436

C 0 N T E N T S

Page

Determination of no injury or likelihood, thereof 1

Statement of reasons:

Views of Chairman Sutton and Commissioner Thunberg 2

Views of Commissioner Clubb 7

Views of Commissioner Leonard 13

UNITED STATES TARIFF COMMISSION

LTA1921-5g August 5, 1969

CONCORD GRAPES FROM CANADA

Determination of No Injury or Likelihood. Thereof

On May 5, 1969, the Tariff Commission was advised. by the Assistant

Secretary of the Treasury that Concord grapes imported from Canada are

being, and are likely to be, sold. in the United. States at less than fair

value within the meaning of the Antidumping Act, 1921, as amended, In

accordance with the requirements of section 201(a) of the Antidumping Act

(19 U.S.C. 160(a)),•the Tariff Commission instituted. investigation No.

AA1921-56 to determine whether an industry in the United States is being,

or is likely to be, injured, or is prevented from being established, by

reason of the importation of such merchandise into the United States.

A public hearing was held. on June 24 and. 25, 1969. Notice of the

investigation and. hearing was published in the Federal Register (34 F.R.

7594 ).

In arriving at a determination in this case, the Commission gave due

consideration to all written submissions from interested. parties, all

testimony adduced. at the hearing, and all factual information obtained, by

the Commission's staff from questionnaires, personal interviews, and

other sources.

On the basis of the investigation, the Commission 1/ has determined

that an industry in the United States is not being, and. is not likely to

be, injured, or prevented from being established, by reason of the importa-

1/ Commissioner Newsom did. not participate in the investigation since, while he served as Master of the National Grange, that organization took a position concerning the importation of Concord grapes from Canada.

2

tion of Concord grapes from Canada sold. at less than fair value within

the meaning of the Antidumping Act, 1921, as amended-

Statement of Reasons

Views of Chairman Sutton and Commissioner Thunberg

Canadian Concord grapes have been marketed for many years under a

system which maintains relatively high price levels for that portion of

the crop sold to licensed. processors in Canada. The remainder of the

Canadian crop is sold domestically or exported at prices which are general-

ly lower. For many years grape processors in the United States have en-

couraged. the Canadian growers to export Concord grapes to them for use as

supplemental supplies, particularly in years of short crops. Traditionally,

the grape growers in Canada and. the United States have worked together and

cooperated in the advancement of their horticultural and marketing prac-

tices in connection with Concord. grapes. Only in the last few years have

the U.S. crops reached a volume threatening to exceed normal requirements.

In the key year under consideration, 1967, imports of Concord -grapes from

Canada equaled 2.3 percent of U.S. production of such grapes.

In 1967 the United. States had the largest crop of Concord grapes in

history. Concurrent with the start of the harvest of the crop, the com-

plainant requested. this dumping proceeding. As an outgrowth of that com-

plaint, the Treasury Department advised the Tariff Commission on May 5,

1969, that Canadian Concord. grapes sold at less than fair value (LTFV) were

being, and were likely fO'be, imported. into .the United. State.

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files furnished. to the Commission show that a large portion (but not all)

of the 1967 imports were sold. at LTFV. The amounts of the price differ-

entials between fair value and export prices were variable, some being

minor in relation to the price obtained. in the United States for such

grapes. No imports during 1968 were repor .ted sold. at LTFV. In the circum-

stances, we deemed. 1967 as the year for which the question of injury was

most relevant and. focused our study on the impact of LTFV imports in 1967

to determine whether injury occurred. within the meaning of the Antidumping

Act, 1921, as amended-

Virtually all imported. Concord grapes enter the United States at

Buffalo, N. Y., and. Detroit and Port Huron, Mich. The major Concord grape

growing centers are located. near the Great Lakes in the United States and

Canada and. in the State of Washington.

Concord. grapes are virtually all consumed. by wineries or by processors

who make juice. A brief discussion of the systems by whiCh each of these

two categories of grape users secure grapes and. of the competitive condi-

tions under which the domestic and. imported. grapes were sold. is pertinent

to an evaluation of the effect of imports in this case.

About 7 percent of all Concord grapes are processed by wineries direct-

ly into wine. The wineries traditionally buy Concord. grapes for cash from

growers in the vicinity of the wineries at premium prices designed. to re-

ward the growers for planting other varieties of grapes which are commercially

more essential to the wine industry. These premium prices generally exceed.

the average cash prices paid. for Concord. grapes by processors of grape juice.

In 1967 these wineries obtained only 1 percent of their supplies of Concord

4

grapes from Canada. They paid. premium prices for domestic Concords to

maintain assurances of their suppliers' delivery or other grapes, but

paid. a much lower price for the imports. However, the price for these

imports was still about $5 per ton higher than the average "cash market"

price paid by juice processors for domestic Concords. 1/ As the imports

sold to wineries merely supplemented. supplies without adversely affecting

prices of domestic Concords, no injury can be identified in connection

with the sale of such imported grapes.

About 92 percent of all Concord. grapes are consumed. by processors

who make grape juice, some of which is later made into wine, jelly, and

so forth. These processors procure their grapes by one or more of the

three methods described. below.

Of the Concord grapes consumed. by such processors, 65 percent are

delivered to five cooperatives. The grapes are not "purchased!' by the co-

operatives. Rather, as income is realized. for a particular crop, it is

paid. out to the grape-grower members in several incremental payments (cash

and/or certificates). Several years may elapse before the last payment

is made. The payments to growers are made on a pro rata basis depending

on the tonnage and. quality of grapes furnished. The growers' returns per

ton of delivered. grapes are, in effect, payments for fresh grapes plus

net profits from the processing and. sales operations of the cooperatives.

Of the five cooperatives, two had a Canadian member from whom they accept-

ed grapes in 1967, as in past years, on the same basis as they accepted.

1 For purposes of this statement, cash market refers to that market in which the final purchase price of Concord grapes is fixed or known prior to, or at the time of, delivery of the grapes. Actual payment is made on such grapes at the time of delivery, or within about 30 days.

5

domestic grapes. The two Canadian farmers received. the same payments as

the U.S. members. The imports from the Canadian farmers accounted. for

3 percent of the total grapes processed. for the two cooperatives. We

could perceive no measurable effect on the financial returns of such co-

operatives by reason of the imports in question.

Twenty-seven percent of the Concord. grapes used. for juice are proc-

essed by independent firms who purchase on an annual contract basis. The

contracting farmers agree to accept payment in installments in a total

amount equal to the market value for such grapes. Payments are made during

a specified. period, usually from October through December of the crop year.

We were unable to establish a precise formula fOr determining such, market

value. Nevertheless, growers selling their crops under these circumstances

generally realize a price higher than the price for grapes sold. in the

cash market. No Canadian grapes were sold. to processors' under these con-

ditions.

Eight percent of the Concord. grapes used. by juice processors are pur-

chased. in the cash market. It is estimated. that half of these grapes are

rejected. or distress grapes. These are grapes that have been refused. by

the processor for whom they were intended, for one or more reasons. Their

brix count may be too low; they may be deteriorated in quality; or they

may be in excellent condition but delivered, to the plant off -schedule when

it is overloaded and. cannot accomod.ate them. In any event, such grapes

must be sold immediately to any processor who is willing and. able to handle

them. The other grapes sold. on the cash market are either under contract

for a known price or are crops the disposal of which farmers have not

6

committed in advance of harvesting. In years of acute shortages uncom-

mitted. crops command good. prices, but in normal years they generally

bring the lowest prices. Few growers run the risk of this type of specu-

lation. It was in this cash market that the remainder of the Canadian

Concord grapes were sold. in 1967. About one-third of these imports were

shipped. 400 miles to Michigan processors who had a short supply. The

grapes were delivered. about 3 days after harvesting. Their average condi-

tion was not on a par with most of the domestic grapes delivered in that

cash market. The remaining two-thirds of these imports were sold in New

York State, principally in the vicinity of Buffalo.

The record shows that in 1967 the Canadians first held. out for a

delivered price of $90 per ton, a price not generally achieved by domestic

growers. Despite the generally lower quality of the Canadian grapes, they

were sold. in the Eastern (Michigan and. New York) cash market at an average

price of $85.98 per.ton, whereas the domestic grapes averaged $85.66 in

the same market. In the circumstances we find no deleterious effect oc-

casioned. by such sales as would. constitute injury attributable to dumping

within the meaning of the Antidumping Act.

Due to substantially higher returns received by Welch growers, the

average price received. by growers for all Concord grapes sold for juice is

higher than the average price of imported. grapes each year. There is,

however, no measurable effect of imports on the average price received by

all growers. Both domestic production and. imports increased. substantially

between 1966 and 1967 but a noticeable reduction in average prices and

aggregate returns to growers did. not occur. Because the average price

7

remained. about the same in the face of substantially larger supplies in

1967, returns to growers increased, significantly in that year. We,

therefore, conclude that not only is there no evidence of injury from

LTFV imports in the components of the U.S. market for Concord grapes, but

there is no evidence of injury to the aggregate. Canadian authorities,

moreover, have demonstrated a successful, cooperative attitude toward.

avoiding disruptions in the U.S. Concord. grape market. Canadian processor;s

are gradually increasing their consumption of Concord. grapes while Canadian

growers are merely maintaining present production levels. Accordingly,

we have no reason for expecting Canadian exports of Concord. grapes to pose

the likelihood of injury to a domestic industry.

Views of Commissioner Clubb

Although this appears to be a classic dumping situation, I am

unable to find that the complaining domestic producers are either

presently being injured or are likely to be injured in the future. Since

this case is unique, a short comment about it appears to be in order.

In an economic sense, both the U. S. and the Canadian growers of

Concord grapes engage in price discrimination. Ninety-five percent

or more of the U. S. Crop is committed under contract to particular

processing plants before harvest and 5 percent is uncommitted. The

price determinations for nearly all of the committed grapes are made

after processing, while the price for a small part of such grapes and

for all of the uncommitted grapes (which constitute the cash market) is

determined before processing. (The great bulk of the Canadian imports

8

are sold as uncommitted grapes.) Prices for the uncommitted grapes

are generally lower and fluctuate more widely from year to year than the

prices for grapes committed under contract before harvest.

In Canada almost the same thing is done. Pursuant to the Farm

Products Marketing Act, representatives of the Canadian growers

negotiate a price for the more than half the crop which is sold to

processors licensed to process food for resale, and the remainder of

the crop is sold in the fresh market for house use. Prices paid by the

licensed processors are more stable and higher, sometimes as much as

twice as high, as prices in the cash market. In a typical year licensed

processors take about 65 percent of the Canadian crop, 15 percent is

sold in the fresh market in Canada, and 20 percent is exported to the

cash market in the United States.

It is the 20 percent of Canadian Concord production exported to the

United States that has raised the problem presented by this case. In

1967 the average price of Concords sold in Canada to licensed processors

was $97 (U. S. currency), while the grapes exported to the United States

were sold at an average price of $51. The Treasury Department has

found that these latter sales were made at less than fair value, and,

accordingly, the Tariff Commission must now determine whether, as a

result of such sales, a domestic industry "is being or is likely to be

injured."

The domestic industry contends that the availability of Canadian

grapes at less than fair value in the bumper crop year 1967 depressed

prices which they received for their grapes to the extent that they were

9

"injured" within the meaning of the Antidumping Act. Since the grapes

exported from Canada accounted for almost 50 percent of all the grapes

sold for cash to the eastern United States juice processors in that

year, the contention must be conceded to have some merit. Cast Iron

Soil Pipe from Poland, AA1921-50, TC Publication 214; Titanium Sponge

from the U. S. S. R., AA1921-51, TC Publication 255.

But the test that must be applied by the Commission under the

Antidumping Act is whether a United States industry "is being injured"

or "is likely to be injured" by the LTFV imports. I do not see how we

can find in 1969 that the domestic producers of an annual crop are

presently being injured by imports which took place almost two years

ago. The crop year 1967 is already ancient history as far as the cash

market is concerned. Especially is this true since everyone concedes

there were no LTFV imports in the following year, 1968.

We have been instructed by our reviewing court that the Dumping

Act is not a penal measure, 1/ and, accordingly, it must follow that it

is not designed to punish past wrongs. Rather, it is designed to stop

present violations and to prevent them in the future. Of course, time

2/ In C. J. Tower & Sons v. United States, 71 F.2d 438 (CCPA 1934), the Secretary of the Treasury had imposed a special dumping duty under the Antidumping Act of 1922, and the importer protested claiming that the Act was unconstitutional because it authorized the Secretary to impose a penalty or fine by an administrative order, thus depriving the importer of property without due process of law. The Court held, how-ever, that the special dumping duty was a tax, not a penalty, and, therefore, it could properly be imposed by administrative order. In arriving at this conclusion the Court laid great stress on the fact that the special dumping duty was designed merely "to equalize the competitive conditions between the exporter and the American industries affected." 71 F.2d 438, 445.

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must be allowed for the normal processes of industry to produce a com-

plaint and to process it through the Treasury Department so that the

present tense term "is being injured" cannot be applied in a strictly

technical sense. Judgment must always be made on past events. But if

the Antidumping Act is to be remedial, rather than punitive, the

judgment which we make must bear some reasonable relationship to that

is presently going on in the marketplace. Where an annual crop is

involved, a finding of injury almot two years after the LTFV sales

took place would merely punish the wrongdoer for past misdeeds, a

function which we are not authorized to perform under the Antidumping

Act.

This may seem a harsh result to the complainants, especially since

they filed their complaint promptly in September 1967 and none of the

delay appears to be attributable to them. Why it took the Treasury

Department twenty months, from September 1967 to April 1969, to pro-

cess the complaint is not made clear by the record, but whatever the

reason, it has removed our consideration of the matter so far in time

from the LTFV sales, that a . finding of present injury is no longer

possible.

There remains the question of whether the domestic industry is

"likely to be injured" in the future, for this, too, can trigger dumping

duties. On the one hand, it is argued that the Canadian producers have

always sold their excess production in the United States, and that in

years of abundance these sales historically have been at less than

1J

fair value. Accordingly, it is urged that the Commission should presume

that the Canadian producers will continue this process and it is only a

matter of time until their LTFV sales injure the domestic industry,

unless they are restrained by dumping duties. On the other hand, it is

argued that the Ontario Marketing Board is discouraging the planting of

Concords in favor of other varieties, and that Canadian production has

leveled off. Since an increasing amount of Concords is being absorbed

by Canadian processors, exports to the United States have declined in

recent years. Moreover, the Canadian producers have at all times shown

a great sensitivity to the problems of the United States producers, and,

despite the experience of 1967, have gone to considerable lengths to

avoid disrupting the United States market. Under such circumstances,

the possibility that injury will be done in the future cannot be ruled

out, but it does not appear to be sufficiently likely to justify a

dumping finding.

1 3

Views of Commissioner Leonard

concur with the negative determination of the other Commis-

sioners but find myself unable to subscribe wholly to their state-

ments of reasons for their determination. The significant points of

difference are explained below.

The statement of Chairman Sutton and Commissioner Thunberg

satisfies me for the most part with respect to the analytical treat-

ment of the economic data involved in the negative determination.

However, the statement fails to treat specifically with all of the

pertinent terms of the Antidumping Act of 1921, as amended, and

therefore is unclear in applying that data against the benchmarks

of the statute.

Under the Act, the Commission must determine whether "an

industry in the United States is being or is likely to be injured,

or is prevented from being established, by reason of the importa-

tion of such Cd-umpe7 merchandise into the United States."

The "industry in the United States" in this investigation is

the Concord-grape-growing operations of the U.S. growers. Although

other industries in the United States are affected one way or

another by imports of fresh Concord grapes, such adverse impact as

there may be from imports of such grapes would be experienced in

greatest degree by the aforementioned U.S.-Concord-grape-growing

industry.

1.4

The U.S. growers of Concord grapes are concentrated primarily

in four separate and distinct geographical areas of the United

States: (1) A portion of the State of Washington, (2) a portion of

the State of Michigan, (3) contiguous portions of the States of

New York, Pennsylvania, and Ohio, and (4) the Finger Lakes area of

the State of New York. Due to the perishability of fresh Concord

grapes and the need for prompt delivery, the wineries and processors

have located their receiving plants in these growing areas. The

geographical separation of the four major U.S. growth-distribu-

tion areas for fresh Concord grapes and their virtual economic

isolation from each other provide a basis for regarding the fresh

Concord grape operations of the U.S. growers in each of these areas

as separable segments of a national industry for the purposes of

the Antidumping Act.

Concord grapes are also grown in the Erie-Ontario grape-growing

belt of Canada. This belt is close to, and its exported fresh

Concord grapes are sold almost exclusively to, users who are also

served by the U.S. growers in the aforementioned areas of Michigan,

of New York, Pennsylvania, and Ohio, and of the New York Finger Lakes.

The impact of imports of fresh Concord grapes--whether or not dumped--

is exerted primarily and most directly on the U.S. growers of such

grapes in these three growth-distribution areas, the impact on the

growers in the Washington area being nil.

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In my view, the facts obtained by the Commission--as largely

reflected in the statements of the other Commissioners--clearly show

that such adverse impact as the dumped Concord grape imports are

having, or are likely to have, on any of,the growth-distribution

segments or areas of the U.S.-Concord-grape-growing industry is

insignificant or immaterial. In addition, there is no evidence

whatever before the Commission indicating that any industry in the

United States is prevented from being established by reason of the

dumped imports in 'question.

There is another aspect of this case which needs further

attention and clarification. The statute, when referring to injury,

speaks in terms of both the present and the future. The question is

whether an industry "is being" or "is likely to be" injured by

dumped imports. The case before the Commission presents a peculiar

problem which apparently has not been present in earlier cases con-

sidered by the Commission. The growth and the disposition of fresh

Concord grapes are seasonal matters. Not until shortly before har-

vesting and during the very short period of harvesting and disposition

is it possible with any certainty for the growers and users to appraise

fully the conditions of trade. There are no grape inventories from

season to season and continuity of production is subject to varia-

tions from year to year which cannot be wholly planned for by the

growers and users. In seasons when bumper crops are grown, as in

1967, the evidence before the Commission indicates that it has been

the practice of Canadian exporters to sell in the U.S. markets at

dumping prices.

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Although it cannot be determined in advance which seasons will

bring bumper crops, the past growing and pricing practices of the

Canadian exporters indicate the likelihood of continued dumping in

U.S. markets when bumper crops do occur. With this apparent con-

tinuity of dumping practices by the Canadian exporters, I would have

no difficulty finding that the U.S.-Concord-grape-growing industry

"is being or is likely to be injured" by such dumped imports if,

despite the absence of dumped imports in the most recent crop year

(1968), the growing and pricing practices of the Canadian exporters

had already produced injury within the meaning of the Antidumping

Act or were likely to do so in connection with subsequent bumper

crop years. I have no alternative but to make a negative determina-

tion in this case, however, having already concluded that for the

recent period--including 1967 when one of the greatest volumes of

dumped imports was received--the adverse impact, if any, on each

segment of the U.S.-Concord-grape-growing industry 'is not significant

or material and, for the reasons explained in the statement of

Chairman Sutton and Commissioner Thunberg, is not likely to be

significant or material.

Accordingly, for the reasons indicated, I have concluded that

no industry in the United States is being or is likely to be injured,

or is prevented from being established.